Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3138306 times)

DRValue

  • Sr. Member
  • ****
  • Posts: 318
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12380 on: May 13, 2019, 10:54:27 AM »
Calabria specifically said he is obligated by the statute to release after recap. That is a BFD for him to say that. But, FUD like this does make it harder to raise capital, so its net negative, imo

what's FUD? 

if this just means that congress doesn't do anything, and having heard that calabria considers himself obligated to restore capital, dont you think this makes institutional investors have fewer rather than more questions in the capital raising process?

Fear, Uncertainty, and Doubt.

A value investors best friend, you love it when you see it.
Not Investment Advice. Do Your Own Research.


cherzeca

  • Hero Member
  • *****
  • Posts: 1941
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12381 on: May 13, 2019, 10:58:53 AM »
Calabria specifically said he is obligated by the statute to release after recap. That is a BFD for him to say that. But, FUD like this does make it harder to raise capital, so its net negative, imo

what's FUD? 

if this just means that congress doesn't do anything, and having heard that calabria considers himself obligated to restore capital, dont you think this makes institutional investors have fewer rather than more questions in the capital raising process?

Fear, Uncertainty, and Doubt.

A value investors best friend, you love it when you see it.

got it.  and so why net negative?

hardincap

  • Hero Member
  • *****
  • Posts: 686
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12382 on: May 13, 2019, 11:23:51 AM »
i just think antagonistic comments by influential politicians dont help when you're trying to raise 100bn from the market. the market reaction from this mildly negative headline was fairly sharp.. how bad will it be if/when politicians actively try to derail an admin-led release? im expecting a moelis type recap plan to be released next mo, and we'll see what kind of execution risk discount the market puts on f&f. i suspect at that point, the "easy money" will have been made...

Jcmeg35

  • Newbie
  • *
  • Posts: 22
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12383 on: May 13, 2019, 11:36:49 AM »
Overall, I also agree that the biggest takeaway is that Congress is unlikely to act.

I also think that @hardincap and the market's reactions are justified because it highlights the numerous moving parts, number of constituents involved, and how complicated this process is. I think part of the problem is that Calabria & co. have just started the narration process about how they plan to act. I think as we move down the road with TSY response to WH and more details emerge Mnuchin, Calabria, etc. will move into "pitch". I think at that stage, once the wheels are fully in motion, they will discuss how congress etc. are not material risks to investors. This is all to say, I think this will all emerge in time.

I also think it is important to keep in mind that while all the talk has been positive, at this stage, there have been no concrete actions that have been taken. I think this is also why Calabria's Fox interview, despite saying some pretty constructive things on IPO, ending NWS, his mandate to R&R, etc. didn't move the price up that much.
« Last Edit: May 13, 2019, 11:52:40 AM by Jcmeg35 »

cherzeca

  • Hero Member
  • *****
  • Posts: 1941
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12384 on: May 13, 2019, 12:05:11 PM »
I agree that there are a lot of moving parts and the most dangerous part is Congress. If I am right and brown is saying he won’t back Crapo then I think the chances that this most dangerous part would  be moving has decreased

orthopa

  • Hero Member
  • *****
  • Posts: 650
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12385 on: May 13, 2019, 01:06:37 PM »
As I think back into the last time treasury had to raise money via TARP style bailouts they sold their warrants. Any chance Treasury converts the Sr to common dilutes common right off the bat, then raises money on top of that? As a sweetener they could sell their warrants after modifying the strike price to something more reasonable. The majority of the value could be in time value of a 5-10 yr warrant and would surely be bought.

cherzeca

  • Hero Member
  • *****
  • Posts: 1941
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12386 on: May 13, 2019, 02:43:30 PM »
As I think back into the last time treasury had to raise money via TARP style bailouts they sold their warrants. Any chance Treasury converts the Sr to common dilutes common right off the bat, then raises money on top of that? As a sweetener they could sell their warrants after modifying the strike price to something more reasonable. The majority of the value could be in time value of a 5-10 yr warrant and would surely be bought.

treasury will have to decide how much it wants to keep from this transaction, knowing that to date it has been already paid in accordance with original terms plus $25B, understanding that the more it wants to keep the less likely it will be able to execute the transaction in the capital markets

Ahab

  • Jr. Member
  • **
  • Posts: 83
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12387 on: May 13, 2019, 04:58:22 PM »
I'm curious what others think about Fannie Mae common at these levels. My very speculative opinion is that they currently are a better value than the preferreds (currently only in preferreds myself). The common share price reflects a wider dispersion of outcomes. To me, a bet on common is a bet on moderate dilution instead of maximum dilution. Yet, assessing probabilities about the recap's mechanics is what trips me up..
Holdings: FNMAS/J/N, FMCKO, BAC, JPM, GOOG, GM (via calls), FELP, Tesla (short), Carvana (short)
Twitter: AhabValue

cherzeca

  • Hero Member
  • *****
  • Posts: 1941
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12388 on: May 13, 2019, 05:17:58 PM »
I'm curious what others think about Fannie Mae common at these levels. My very speculative opinion is that they currently are a better value than the preferreds (currently only in preferreds myself). The common share price reflects a wider dispersion of outcomes. To me, a bet on common is a bet on moderate dilution instead of maximum dilution. Yet, assessing probabilities about the recap's mechanics is what trips me up..

recap mechanics should trip you up since no one knows what the hell is coming.  this board is a bunch of wild and crazy guys who are into the least speculative bet you can make in this name. which is junior prefs, but still plenty speculative.  but then, ahab, you are a hunter for the big whale....

DRValue

  • Sr. Member
  • ****
  • Posts: 318
Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12389 on: May 13, 2019, 11:38:15 PM »
I'm curious what others think about Fannie Mae common at these levels. My very speculative opinion is that they currently are a better value than the preferreds (currently only in preferreds myself). The common share price reflects a wider dispersion of outcomes. To me, a bet on common is a bet on moderate dilution instead of maximum dilution. Yet, assessing probabilities about the recap's mechanics is what trips me up..

recap mechanics should trip you up since no one knows what the hell is coming.  this board is a bunch of wild and crazy guys who are into the least speculative bet you can make in this name. which is junior prefs, but still plenty speculative.  but then, ahab, you are a hunter for the big whale....

The more I think of the common the more I like them. I'm heavy in them but hedged with prefs. I've been looking for decent investments for years and they seldom come along so when they do I have to go big. I'm looking for a home run so commons have to be involved for me. Some see this as a risky investment but the way I've always seen it is that these are two of the best businesses in the world in an unsustainable position not of their making. Eventually it'll work out.
Or I'll go back to work...
Not Investment Advice. Do Your Own Research.